1st December 2020 - Post by Picon-Deed

Myanmar Exports Primed for Growth in Post-Vaccine-2021

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While the recent, very positive news regarding a number of vaccines will not spell the end of COVID-19, it marks an important new chapter for a phoenix-like 2021 with the revival of many developed economies resulting from a relaxing of restrictions due to herd immunity being established over the course of 2021. While it may take longer for Myanmar to have full access, the country’s key export markets will likely be full steam ahead for 2021 allowing Myanmar to boost its already strong decade long export expansion.

Despite often dismal accounts regarding industrial production in Myanmar during COVID-19, the statistics from a number of key markets for manufactured items, especially garments and footwear,  represents a more nuanced picture. Rather than use often conflicting and confusing export figures from Myanmar official sources, Picon-Deed has considered instead their mirror image – the official imports into various countries from Myanmar. In effect, Myanmar’s exports are the receiving country’s imports.

Here we take a look at three countries that are important export markets for Myanmar manufactured products and have available up-to-date import statistics. We start with the USA.

UNITED STATES OF AMERICA

 

Exports from Myanmar to the USA mostly consist of leather goods, woven and knitted apparel and footwear. These represent key growth sectors over the past ten years for Myanmar.

Figure: Monthly imports by the USA from Myanmar

Source: US Census

Clearly exports have continued their growth trend in 2020 although with some supply bottlenecks representing short term fluctuations in the middle of the year. One potential caveat is to what extent the 2020 figures represent a short-term surge in personal protective equipment “PPE” with Myanmar focusing on the provision of gowns and hair coverings.

Future prospects look strong with some possible headwinds and tailwinds resulting from the forthcoming Biden administration. On the negative side, the Democrat led government may be less accommodative of the northern Rakhine situation with increased pressure for sanctions. On a more upbeat note, the Biden presidency is expected to roll back the previous protectionist measures and – based on the still inconclusive Senate election – sign up to a revived Trans-Pacific Partnership.

JAPAN

Japan is a major importer of Myanmar’s manufactured goods which consist of mostly apparel and to a lesser extent footwear.

Figure: Monthly imports by Japan from Myanmar

Source: Japan Ministry of Finance / Converted to USD per monthly rate

After a strong showing at the start of the year the COVID-19 crisis hit exports in the middle of the year. The situation changed for Q3 with exports to Japan rebounding strongly, overtaking the 2018 figures.

Japan and Myanmar are part of the The Regional Comprehensive Economic Partnership (RCEP) and consolidation of ‘rules of origin’ definitions and quotas along with a public pivot of manufacturing away from China could see further investment by Japan into Myanmar of export related sectors thus boosting further trade.

UNITED KINGDOM

Apparel, both knitted and non-knitted, represents the lion’s share of imports to the UK from Myanmar. After leaving the trade provisions of the European Union on January 1st 2021 the UK has already agreed to retaining the Generalized System of Preferences (GSP) with zero or ultra-low tariffs for Myanmar’s garment exports.

Figure: Monthly imports by UK from Myanmar

Source: National Office for Statistics (UK)

Imports into the UK have been down in 2020 compared to the previous year but have picked up dramatically in recent months. The interesting surge in April may have been the result of urgent demand for PPE in the form mostly of surgical gowns. An announcement was made during a press briefing by the Chancellor of the Exchequer regarding a shipment of PPE from Myanmar. There may be further potential for growth in health-related garments even after the advent of a vaccine.

CONCLUSION
Exports down in 2020 but strong revival expected in 2021

Japan, USA and UK are key markets for Myanmar’s garment and footwear export business alongside other destinations of the European Union and South Korea.

Figure: Combined monthly imports by Japan, USA & UK from Myanmar January-September

Source: US Census, Ministry of Finance (Japan), Office of National Statistics (UK)

Even with much of the global economy grinding to a halt in 2020 Myanmar export numbers have surpassed those in 2018 and have come close to 2019. It would be expected that without COCID-19 exports would have been much stronger and the trend for further growth for the rest of the decade seems promising. Continuing favourable tariff regimes will continue to attract clothing manufacturers.  Conversely many other countries will also be in the hunt for the slice of the garment export pie and Myanmar should focus on development of its garment sector through positive economic and  trade policies coupled with infrastructure development with objective of moving its process up the value chain and thus gain further economic benefit.

The development of industrial estates will allow for clustering to evolve but while foreign investment laws have helped in this regard, financial impediments and poorly crafted laws such as the Myanmar Industrial Zone Law will likely represent headwinds. Myanmar must also be well placed to benefit rather than lose out from changing global trade patterns. But with many positives on its side the future of export orientated manufacturing looks bright.

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